Optimal Pricing for Natural Monopoly
Post on 02-Jan-2016
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Optimal Pricing for Natural Monopoly. Marginal Cost pricing implies losses and the need for subsidy Optimal second-best pricing (Ramsey Pricing). Ramsey Pricing. Cross-Subsidization and Ramsey Pricing. Stand-Alone Cost test (SAC). The Incremental-Cost Test. - PowerPoint PPT Presentation
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Optimal Pricing for Natural Monopoly
• Marginal Cost pricing implies losses and the need for subsidy
• Optimal second-best pricing (Ramsey Pricing)
Ramsey Pricing
1 1 2 211 22
1 2
p mc p mcR
p p
Cross-Subsidization and Ramsey Pricing
• Stand-Alone Cost test (SAC)
( )i i ip q SAC q
The Incremental-Cost Test
( )i i i ip q IC q
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